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Midterm

Exam 3 Questions

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Department
Finance
Course
FIN 3715
Professor
All Professors
Semester
Fall

Description
Chapter9ThreethingsexpectedtocalculateIRRNPVPayback1whichofthefollowingoftheseisacapitalbudgetingdecisionbigdecisionsregardingfutureoperationsofafirmdecidingwhetherornotanewlyinventedproductwillbeproduced2whichonethefollowingisthebestexampleoftwomutuallyexclusiveprojectsBuildingeitheraclothingstoryorarestaurantatadowntownlocationinPAUSENPVformutuallyexclusivehowmuchvalueyouarecreatingforthefirmifgoalistomaximizeshareholderwealthusetheonewithhigherNPV3Whatisthenetpresentvalueofaprojectwiththefollowingcashflowsiftherequiredrateofreturnis14percent033680alwaysnegativeinitialinvestmentsomoneyyouarespending11079622230834170NPV422992negativecashflowwewouldnotembracethisprojectWecanalsocalculateInternalrateofreturnIRR5755thistellsusetheratethatmakesNPVequalto0Soifyourequireareturnthatis5755insteadof14wewouldnothaveanegativeNPVwewouldhavea0NPV4WhatistheNPVofaprojectthathadaninitialcashoutputof18900andthefollowingcashflowsRequiredreturnis1325percent1360024200312500NPV384060IRR298whichislessthanrequiredreturnrejectprojectdoesntmakeenoughmoneyforus5YouareconsideringthefollowingtwomutuallyexclusiveprojectsRequiredreturnis1075forprojectARequiredreturnis12forprojectBAb0360006990012160052600218200461003221000
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